Solar manufacturing road map: India needs to be self-reliant, but worries remain

Capacity additions peaked till financial year 2018; module prices and solar imports declined over last 2 years

By Godwin Adams
Published: Friday 14 August 2020

The novel coronavirus disease (COVID-19) pandemic has thrown India’s economy off the track. The restrictions imposed on supply chain in the wake of the unprecedented lockdown adversly impacted installations of solar photovoltaic (PV) systems. The dependence of the Indian solar market on Chinese imports has affected growth of the sector.

India has a strong manufacturing base for wind equipment; about 87 per cent of our needs are catered to by imports from Chinese markets in the solar industry, which could potentially threaten energy security.

The pandemic, however, has shone the spotlight on the importance of building domestic manufacturing facilities for solar energy.

India has a lot of potential for solar — 20 gigawatt of solar capacity is under installation currently. The dependence on imports is increasing as well.

India had deployed 87 GW of renewable energy capacity as of 2019, and these numbers need to be viewed against the target of achieving 450 GW of renewable energy capacity by 2030 (a large part of it is solar).

Capacity additions peaked till the financial year 2018, but module prices and solar imports declined over the last two years.

“India is low on labour cost and high on capital cost and prohibitive power tariffs, and the absence of incentives makes India non-competitive globally,” said Pranav Master, director, CRISIL Infrastructure Advisory, during a webinar on Solar Manufacturing Road Map: Making India Self Reliant. It took place on July 30, 2020.

Master pointed out that the Chinese local government provides land for construction of firms on a lease basis or at a subsidised rate. On the other hand, the cost of the land has to be taken by the firm in India.

Economies of scale favour the Chinese manufacturing sector. India has medium-scale plants of 0.5-1 GW capacity, while plants in China have capacities of three-five GW, thereby providing a huge advantage in cost reduction.

Firms in India are provided loans with an interest rate of 10-13 per cent with shorter return periods, whereas only 0-0.5 per cent of interest along with long tenures are provided by China.

“The competition with the Chinese market is difficult in terms of pricing as there is less demand and some states haven’t opened their operations due to COVID-19,” said Sunil Rathi, director, sales & marketing, Waaree Energies Ltd.

Commenting on the inefficiency of Indian federal structure and scant research and development (R&D) facilities, Master said, “Though the Union government is taking steps to open up markets in India, the state governments aren’t working efficiently.”

He added: “India is rich in labour market but lacks skilled workers. It is good at technology development platforms. The quality of solar cells manufactured in India is at par with other country’s quality. But R&D is inadequate.”

He underscored the role of policy framing for witnessing a large growth in inland manufacturing. He said, “Large-scale utility project drivers such as rooftop solar, railways, Central Public Sector Undertaking scheme, export opportunities could boost Indian solar manufacturing firms.”

Due to these enabling policies, some firms are looking forward to adding over four-five GW of new capacities each over the next two years.

Nandkumar Pai, chief execuitve, RenewSys India Pvt Ltd, announced their plan for expanding its manufacturing capacities. He said, “We are working to increase the capacity of cells by five times and modules by two times in the next six-nine months — as soon as basic customs duty is announced. We are likely to invest around Rs 700 crore in debt and equity on the expansion of capacities.”

Renewsys has a cell capacity of 130 megawatt that will be expanded to 550 MW, and an 1 GW capacity will be added to the 750 MW module capacity.

The industry requires more facilitating policies for acquiring land, innovative financing models and clarity on the custom duty structures for the solar manufacturers in developing a sustainable eco-system in the country and strengthening their position in the global market.

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